New Banking Charters for US Fintech Startups Coming

Regulators are planning for new banking licenses for fintech startups across the U.S., said Comptroller of the Currency, Thomas J. Curry last week. The measure will affect startups dealing with lending, virtual currency payments, and deposits.

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National Charters for Responsible Innovators

The Office of the Comptroller of the Currency (OCC) is a federal regulatory arm for the U.S. banking system. While speaking at an event at Georgetown University Law Center, Curry told attendees financial technology has ballooned in value. Over five years fintech has grown from “$1.8 billion to $24 billion worldwide,” he said.  

The OCC believes giving national charters to fintech businesses will spur economic prosperity. The organization has been researching and discussing fintech for quite some time. Just recently the agency created an “office of innovation” underscoring its fascination with financial technology. During the announcement the organization discussed the new charters.

“Providing a national charter to those responsible innovators who seek one and meet our high standards can help promote economic growth across the country and recognizes that technology-based products and services are the future of banking and the economy,” Curry explained to attendees at Georgetown.

Charters Will Apply to Bitcoin & Blockchain Firms

The new rules will apply to blockchain and Bitcoin-related businesses, especially if they facilitate transfers and hold digital asset deposits. Speaking with the New York Times, the bitcoin-based firm Circle welcomed the charter. Circle uses a partner bank to hold deposits, and with a national charter, the company could be its own bank essentially.   

“It’s great to have this new charter as an option. There are a lot of benefits to this,” John Beccia, general counsel at Circle told the publication.

Will a Level Fintech Playing Field Lead to Disintermediation?  

In his speech last week, Curry said the move will “level the playing field” by applying these charters to all banking services. Curry explains that as a former state regulator he understands the concerns about state laws.

“The OCC has taken the position that state laws aimed at unfair or deceptive treatment of customers also apply to national banks. The state laws that typically do not apply are those that impose licensing requirements on a company in order to engage in certain types of business,” he added.

The move to apply charters to financial technology companies highlights the fact that financial incumbents should worry. Startups are using innovative technology and melding it with finances, creating a frictionless transparent environment. These businesses offering peer-to-peer lending, bitcoin remittances and blockchain asset services will now be level with legacy institutions. In the future, the question is will they disrupt the traditional financial operators of today?

What do you think about the creation of the national charters for fintech businesses? Let us know in the comments below.

Images courtesy of Shutterstock, and Pixabay. 

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